Tech conglomerates Broadcom Inc. pretty much removed the remaining hopes of a significant rebuild in the semiconductor market this year, and Thursday said a combination of the sanctions on Huawei Technologies Co., and its customers were concerned about trade concerns.
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sank his guidance for the rest of the year while reporting the second quarter results Thursday afternoon. San Jose, the California-based company said it expects revenue for the semiconductor solution business, still the largest revenue generator, to fall about 1
"In the second half, we expected a recovery; but … with regard to semiconductors, it is clear that the US-China trade conflict, including the Huawei export ban, creates economic and political uncertainty and reduces the visibility of our global customers [original equipment manufacturer] said Broadcom CEO Hock Tan analysts at a conference call.
Broadcom was not the only company that had predicted a stronger second half of the year, almost all chipmakers predicted at some point that sales growth would return in the second half, even if the target had already begun to slip with previous quarter returns.
From March: The promise of a magic rebound for tech comes with little evidence to back it up
Broadcom's results – going through early May – shows that the concerns raised by other chip companies months ago have not diminished and actually may have accelerated. SJ stumbled about 8% in retrospective trading, and most semiconductor holdings also took a blow in the aftermarket market. The largest demand declines in the S&P 500 index
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on Thursday besides Broadcom were all chip makers, led by Qorvo Inc.
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Skyworks Solutions Inc.
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Advanced Micro Devices Inc.
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Texas Instruments Inc.
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Microchip Technology Inc.
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and Micron Technology Inc.
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all of which were down 2% or more as the extended session approached a close.
Tan described dirty original equipment customers who are afraid to place new orders in case they do not use up their holdings, including political uncertainty without end in view of the US and China trade war. Analysts had predicted that US sanctions imposed on Chinese network giant Huawei would turn Broadcom's revenues, but the warning went far beyond that. Tan told analysts that Huawei represented about $ 900 million in revenue last year, but he expects a $ 2 billion semiconductor in addition to the second half semiconductor cards.
"Basically, the compression of the supply chain is what drives this reduction more than anything else, and it's broadly based," Tan said, asking how much of his lack was Huawei versus other OEMs. Broadcom's half-solution business – about three-quarters of Broadcom's total sales – was 10% lower in the quarter.
"We see a very, very sharp and fast contraction of the supply chain and orders out there from our customers, especially by global OEM customers," Tan admitted.
The US ban on Huawei was expected to cause a slight decline for the chip companies. Bernstein Research analyst Stacy Ragson wrote in a recent note that a "Huawei-related disadvantage is likely to be a topic for many semiconductor companies into the other half and beyond. (In fact, it may represent some of a free business passport to reduce expectations) . "
But Tan is admitting that the second half looks weak beyond Huawei, will reverberate through the second half, which – as MarketWatch warned months ago – won't be the panacea chip companies that were proposed earlier this year. Those who are surprised have not paid enough attention.